Although large diversified miners such as BHP Billiton Limited (ASX: BHP) are the preferred type of resources exposure for many Australian investors. Savvy investors should also find a place for other well-managed mining and resources stocks. Rio Tinto Limited (ASX: RIO), Beach Energy Limited (ASX: BPT) and Senex Energy Ltd (ASX: SXY) are examples of other, less diversified, resources companies which should be considered.
Rio Tinto
On first glance Rio shares appear cheap. However with a closer inspection it's easy to see why. With around 90% of FY13 earnings derived from iron ore, the ongoing threat of oversupply and slowing demand makes it tough to justify an investment in the iron ore giant. Outside of iron ore it boasts ongoing copper production increases and a recovering aluminium business and with these Rio could hold significant long-term value for investors, at the right price.
However analysts are forecasting lower iron ore prices in the short to medium term, which may provide a good buying opportunity. As a result of the expected downwards pressure, I don't believe Rio's shares are a bargain just yet.
Beach Energy
As Australia's sixth-largest oil and gas company and the Cooper Basin's largest producer, Beach has a lot to offer investors who want exposure to Australia's booming oil and gas industry. Beach also has a number of tenements in Egypt, Romania, New Zealand and Tanzania. Despite a 2.2% dividend, increasing production and reserves, and increased M&A activity in the sector, its shares still trade cheap.
Senex Energy
Of the Cooper Basin producers, Senex Energy is my number-one pick. It has no debt, increasing production and revenues, low costs and rapidly growing reserves. Despite a setback in production growth, stemming from lower than anticipated pressure at the Growler oil field, earnings are expected to reach 8.4 cents per share by 2015.
3 more high-risk/high-reward resources stocks
Of the three companies I believe Senex represents the best value at current prices. Whilst Rio has the potential for upside surprises in 2014 (given the market seems to have completely written off iron ore miners), it's still too much risk for seemingly little reward.
